Below is note to the financial statements number 15 extracted from the 2016 annu
ID: 2546034 • Letter: B
Question
Below is note to the financial statements number 15 extracted from the 2016 annual report for BOC Kenya Limited.
Required:
(a) What is meant by (i) amortization, (ii) accumulated amortization?
(b) What are intangible assets?
(c) Where are intangible assets listed on the balance sheet?
Cost
At beginning of year
Reallocation to property plant and equipment (Note 14)
Additions
Translation differences
Group
Company
2016 2015
2016 2015
16,299 22,544
16,061 22,544
- (6,220)
- (6,483)
561 -
561 -
(25)
-
At end of year
16,860 16,299
16,622 16,061
Accumulated amortisation
At beginning of year
Reallocation to property, plant & equipment (Note 14)
Charge for the year
At end of year
(15,629) (18,982)
(15,537 (18,982)
- 4,644
- 4,566
(534) (1,291)
(454) (1,211)
(16,163) (15,629)
15,991 (15,537)
Net carrying amount at 31 December
697 670
631 524
Cost
At beginning of year
Reallocation to property plant and equipment (Note 14)
Additions
Translation differences
Group
Company
2016 2015
2016 2015
16,299 22,544
16,061 22,544
- (6,220)
- (6,483)
561 -
561 -
(25)
-
At end of year
16,860 16,299
16,622 16,061
Accumulated amortisation
At beginning of year
Reallocation to property, plant & equipment (Note 14)
Charge for the year
At end of year
(15,629) (18,982)
(15,537 (18,982)
- 4,644
- 4,566
(534) (1,291)
(454) (1,211)
(16,163) (15,629)
15,991 (15,537)
Net carrying amount at 31 December
697 670
631 524
Explanation / Answer
A)--i and ii--=Accumulated amortization is the total sum of amortization expense recorded for an intangible asset. In other words, it’s the amount of costs that have been allocated to the asset over its useful life.
A lot of people confuse amortization with depreciation. Although both are similar concepts, depreciation is used for physical assets like fixed assets whereas amortization is used for intangible assets like patents.
Both Fixed assets and intangible assets are capitalized when they are purchased and reported on the balance sheet. No costs are initially recorded on their purchase dates. Instead, the assets’ costs are recognized ratably over the course of their useful life. This cost allocation method agrees with the matching principle since costs are recognized in the time period that the help produce revenues.
B)--=An intangible asset is an asset that is not physical in nature. Corporate intellectual property, including items such as patents, trademarks, copyrights and business methodologies, are intangible assets, as are goodwill and brand recognition. Intangible assets exist in opposition to tangible assets which include land, vehicles, equipment, inventory, stocks, bonds and cash.
An intangible asset can be classified as either indefinite or definite. A company brand name is an indefinite asset, as it stays with the company as long as the company continues operations. However, if a company enters a legal agreement to operate under another company's patent, with no plans of extending the agreement, the agreement has a limited life and is classified as a definite asset.
C)--=Accumulated amortisation
At beginning of year
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